Table Of ContentPositive and Normative Analysis in International
Economics
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Positive and Normative
Analysis in International
Economics
Essays in Honour of Hiroshi Ohta
Edited by
Murray Kemp
Hironobu Nakagawa
and
Tatsuya Uchida
Editorial and selection matter © Murray Kemp, Hironobu Nagakawa and
Tatsuya Uchida 2012
Individual chapters © Contributors 2012
Softcover reprint of the hardcover 1st edition 2012 978-0-230-30917-3
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First published 2012 by
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ISBN 978-1-349-33914-3 ISBN 978-0-230-34820-2 (eBook)
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Library of Congress Cataloging-in-Publication Data
Positive and normative analysis in international economics : essays in
honour of Hiroshi Ohta / edited by Murray Kemp, Hironobu Nakagawa,
and Tatsuya Uchida.
p. cm.
Includes bibliographical references and index.
1. International trade. 2. International economic r elations.
I. Ohta, Hiroshi, 1949– II. Kemp, Murray C. III. Nakagawa, Hironobu.
IV. Uchida, Tatsuya.
HF1379.P668 2011
337.01—dc23 2011021397
10 9 8 7 6 5 4 3 2 1
21 20 19 18 17 16 15 14 13 12
Contents
List of Tables vii
List of Figures viii
Acknowledgements xi
Notes on Contributors xiii
Preface: A Tribute to Ohta Sensei – How and What
Professor Hiroshi Ohta Has Taught Us xvii
Introduction 1
Murray C. Kemp, Hironobu Nakagawa, and Tatsuya Uchida
Part I Positive and Normative Analysis in
International Economics
1 Normative Trade Theory 7
Murray C. Kemp
2 The Moral Scientific Nature of Stolper-Samuelson’s
Proposal to ‘Bribe’ for Free Trade 17
Hiroshi Ohta
3 Innovations and International Trade 37
Michihiro Ohyama
4 Comparative Cost and Factor Endowments:
Ricardo and Ohlin 54
Bjarne S. Jensen
5 Social Welfare and Pareto Improvement 84
Martin C. McGuire
Part II Perspectives in the Theory of International Trade
6 The Welfare Effect of International Cost Harmonization 103
Anthony Creaneand Kaz Miyagiwa
7 Capacity Constraint, Export Subsidies and
World Recession 117
Hong Hwang, Chao-Cheng Mai, and Ya-Po Yang
8 Subcontracting or Exporting with Flexible Manufacturing 138
Wen-Jung Liang and Chao-Cheng Mai
v
vi Contents
9 Inward FDI and the Size of the Market: Hosting MNCs
or Promoting Domestic Companies? 157
Akinori Tomohara
10 Unionization and the Environment: A General
Equilibrium Approach 172
Chi-Chur Chao and Eden S.H. Yu
Part III Empirical Issues in International Economics
11 How Regional Blocs Affect Excluded Countries:
The Price Effects of MERCOSUR 185
Won Chang and L. Alan Winters
12 Global Imbalances and Exchange Rates: Welfare and
Policy Implications 211
Hironobu Nakagawa
13 Regulation, Quality Adjustment, and Relative Price
Changes: The Case of Yen Appreciation Shock of 1985 221
Kaku Furuya
14 Continued Openness and Reforms for Agriculture in Japan 237
Hidetaka Kawano
Appendix: Hiroshi Ohta: Curriculum Vitae 266
Index 271
List of Tables
4.1 Numerical illustrations of (33), (32), (50) 66
11.1 HS-6 tariff average (unweighted) for non-member,
member and preference margin year for 1,356
products 197
11.2 E stimated coefficients of equation (5) over all
commodities: (A) without and (B) with time
dummies 199
11.3 Total exports to Brazil and possible losses due
to MERCOSUR ($ million) 203
12.1 The current account and the real and nominal
exchange rates 216
13.1 Percentage of households living in houses/
apartments that exceed minimum housing
standard 233
14.1 Input–output accounting table flow in 2005 245
14.2 Social accounting matrix for Japan in 2005 249
14.3 Social accounting matrix for Japan in 2000 249
14.4 Effects of continued opening of Japan’s agricultural
sector on prices, wages, employment and welfare
from 2000 to 2005 253
14.5 Impact of import expansion of Japan’s agricultural
sector on its wages and employment: Simulation 1
for the year 2000, and simulation 2 for the year 2005 257
vii
List of Figures
2.1 G iven,αα,arbitraryL determines KKK along CC,
N N
hence EBA(((L , KKK ), and also EBA(((B , NNN ) along
N0 N0 0 0
PPF as well 22
2.2 Alternative resource allocations and related autarchy
equilibria 22
2.3 General equilibrium of production and trade: Edgeworth
Box diagram 27
2.4 Productive/allocative optima before trade
(under autarchy) 29
2.5 P roductive/allocative optima:After trade in
black vis-à-visbefore trade in gray and white 31
3.1 T he effects of a process innovation 43
3.2 Foreign utility change from a product innovation 47
3.3 The effects of a product innovation: An example 49
4.1 The Ricardian relative costs 67
4.2 Ricardo and Ohlin – with 2 (cid:2) 2 CES economies 76
4.3 Ricardo, Ohlin and Rybczynski–Leontief case 78
4.4 General equilibrium of a small trading economy 80
5.1 Free access vs optimal utilization of alternative opportunities 86
5.2 Efficiency and distribution in socialist
multi-part pricing 87
5.3 Bad welfare effects of repeated Pareto
improvements 92
5.4 S citovsky paradox in space of individual utilities 94
5.5 S ame Scitovsky paradox as Figure 5.4 but in space
of aggregate consumption 95
7.1 Capacity constraint and market equilibrium 121
7.2 Optimal export subsidy policy underk <kk or k >kk 123
HH L
7.3 Optimal export subsidy policy underkk <k <kk 125
H L
7.4 Relationship between capacity constraints and optimal
export subsidy rates asa < a’ 126
7.5 Comparison of optimal export subsidy rates between
k < kk and k=kk 128
HH H
viii
List of Figures ix
7.6 Comparative static analysis of a change in demand under
kk <k < kk 129
H L
8.1 The foreign firm’s outsourcing decision when it serves as a
monopolist 147
8.2 The foreign firm’s outsourcing decision when
firm A exports with own brand 148
8.3 Firm A’s exporting decisions when the foreign
firm outsources either to firms A or to firm B 150
8.4 The foreign firm’s foreclosure decision when
firm A exports with own brand 152
8.5 The foreign firm’s and the domestic firm A’s decisions in
various cases 153
9.1 Production decisions of companies 164
11.1 E xport prices to Brazil relative to export prices to the rest
of the world 190
13.1 Dollar–yen exchange rate 222
13.2 E xchange rate and prices (1985:1 = 100)
1985:1–1987:12 222
13.3 P rices during yen appreciation
(1985:1 = 100)1985:1–1987:12 223
13.4 Exchange rate and employment (1985:1 = 100) 224
13.5 Equilibrium when price ceiling is not binding 229
13.6 Equilibrium when the price ceiling is binding 230
13.7 Effects of revaluation when the price ceiling is initially
not binding 231
13.8 E ffects of revaluation when the price ceiling is initially
binding 231
13.9 P ercentage of public payphones compatible with
calling cards 233
14.1 HO orthodoxy 242
14.2 H.O. Heresy: The Leontief paradox resolved 243
14.3 Illustrative general equilibrium model
incorporating intermediate goods 244
14.4 Output markets for the Japanese economy in 2005 255
